What is first-mover advantage?

First-mover or first-to-market advantage is the belief that there is a benefit to being the first business to enter the marketplace with a new product or service. The advantage may come from being able to grow and develop the market in the absence of competitors―at least temporarily. There is also the potential benefit from the attention businesses often receive when they are pioneering a new concept. The added attention can lead to new customers. If the product or concept is unique, first to market also entitles an enterprise to protect its idea from being used by competitors through patents or copyright.

Successful examples of first-mover businesses, however, are limited. eBay and Amazon.com are exceptions rather than the rule. It is often the "second to market" that possesses the competitive advantage. The first mover generally faces a steep learning curve when developing a business strategy to penetrate a new market. The second to market can observe the first mover's performance and learn from their mistakes without having to experience either the risks or costs of pioneering a new market. The iPod leads the market for MP3 players, but Apple was not the first company to produce the product. A German research organization called the Fraunhofer Society was actually the first mover into the MP3 player market.